The Herald: First Scottish Budget

The Scottish Government has put “fairness, equity and the ability to pay” at the heart of its first tax-raising Budget in over 300 years, Finance Secretary John Swinney has announced.

Mr Swinney picked up where the pre-union Scottish Parliament left off when it set the last rate of “cess land tax” on property in 1706, announcing Holyrood’s first rates of land and building transaction tax.

He lamented the No vote in the independence referendum, which would have allowed him to “deliver a Budget that would lay the foundations for an alternative to austerity”.

He added: “We are not yet in that position.”

He attacked the UK system of land and buildings transaction tax which created “distortions in the residential property market” and “placed a barrier in front of first-time buyers”.

Under the first land tax rates set in Scotland in centuries, a first-time buyer purchasing a house of £130,000 will pay no tax, Mr Swinney announced.

“In exercising its first judgments on national taxes, this Government has put fairness, equity and the ability to pay at the heart of what it has done,” he said.

“That is the benefit of putting decisions about Scotland’s future in Scotland’s hands.

“As a consequence of our proposals, a first-time buyer purchasing a house at £130,000 will pay no tax; a young couple buying a flat at £140,000 will save £1,300 paying only £100 in tax; and a family buying a home at £260,000 will save £4,500 on their tax bill.”

The SNP administration’s “progressive approach” to property tax “is more closely aligned to the ability to pay”, he said.

The threshold for paying the tax will be increased from £125,000 to £135,000, with a rate of 2% on the proportion of the transaction between £135,000 and £250,000.

A 10% tax rate has been set on properties between £250,000 and £1 million, he said.

“Last week, many people energised by the referendum debate will have watched in horror as the Conservative Party cheered the prospect of reducing the incomes of many low-paid workers, in order – not, as they claimed, to reduce the deficit – but to fund a tax break for the better off,” he said.

“This Government will take a very different approach.”

Some 5,000 more transactions will be taken out of tax “supporting first-time buyers and those buying properties in the affordable market”, while tax will be reduced for a further 44,000 house sales up to the value of £325,000.

“We will do this whilst ensuring that 90% of taxpayers will be better or no worse off than under SDLT (stamp duty land tax),” he said.

“And, as a final rate, we will set a top tax rate of 12% for properties above £1 million, ensuring the most well-off in our society make a fair contribution to the public purse.”

Mr Swinney went on to announce an increase in the NHS budget beyond what had previously been planned for 2015-16.

The rise comes after weeks of heated debate over the funding of the health service north of the border.

“Our Budget plan for next year would have involved increasing the NHS budget by £202 million in 2015-16. I can confirm to Parliament that we will not follow that plan,” he said.

“Some in the Opposition have suggested the NHS budget would be cut next year by £450 million.

“Not for the first time, they are wrong.

“In addition to allocating over £400 million in Non-Profit Distribution funding for capital projects, I have decided to increase the health budget from this year to next, not by £202 million but, in total, by £288 million, an additional £86 million – bringing the health budget to over £12 billion for the first time ever.”

Elsewhere in the Budget, the Finance Secretary announced £16.6 million of investment to expand apprenticeships and other measures to help young people into work, and £300 million over two years to extend childcare to 600 hours for all three and four-year-olds and vulnerable two-year-olds.

The Government will also maintain its plan to increase funding for further education to £526 million.

Meanwhile, £390 million will be spent in 2015/16 to provide 6,000 new affordable homes, with an extra £125 million to further support the housing sector.

On infrastructure projects, which covers major investment in areas such as roads, schools and hospitals, Mr Swinney said the Government would secure £4.5 billion of infrastructure investment, including through the use of new borrowing powers now available to Holyrood.

In setting rates for the newly devolved landfill tax, Mr Swinney said he was seeking to avoid “any potential for waste tourism” through material differences between the tax rates north and south of the border”.

He concluded: “This Budget embraces new tax responsibilities for the Scottish Parliament, and within our current powers deals with the challenges created by austerity from the UK. It harnesses the positive engagement we saw in the referendum and provides a response anchored in the approach this Government has pursued since 2007.”